Showing posts with label Borrowing. Show all posts
Showing posts with label Borrowing. Show all posts

10 October, 2010

Independence!

The airwaves and the local newspapers this past week have been filled with talk of the need for Anguilla to seek independence from the United Kingdom. Anguillians have always been the most independent-minded West Indians, so the discussion is a healthy one. From the earliest days of colonialism we have had to make do on our own. Why not now?
No metropolitan power ever ruled us directly, until after the British Invasion of 1969. Alone among the seventeenth and eighteenth century colonies of the Leeward Islands, Anguilla elected its own Governor who was then approved by the Governor in Chief in Antigua. In the other islands, the Lieutenant or Deputy Governor received a patent from the Monarch. Not the Anguillian Deputy Governor.
No expatriate colonial elite, unlike our richer neighbours, lorded it over us. Our flocks of goats and fishing boats during the colonial period were at our own disposal. We were, the truth be told, throughout most of our history, too beggarly-poor. It took a long time before we had our own formally appointed Executive Council. Our first ExCo was established after the 1976 Constitution. Not even after we acceeded to rule by St Kitts in 1825 was there any real interference in the activities of the local Vestry that had always run Anguilla's public affairs.
No British Governor sat in any government house in Anguilla until Charles Godden was appointed Anguilla's first Governor in the early 1980s. Whatever gains we have made socially and economically in recent decades, it has all been done right here in Anguilla.
Today, it is arguable that Anguillians are better off and more economically and socially independent than some of the so-called independent States in the region. Though we are a British Overseas Territory, once we follow the law and the regulations, the British leave us alone to conduct our affairs.
Why then the loud boasts that we raise all our own revenue, and that he who pays the piper should call the tune, and, in recent days, the call that British supervision should be ended? Why all the hysterical talk now from certain quarters of the need to seek political independence from Britain?
The answer is: smoke screens and camouflage. According to what we have been reading in the press and hearing on the radio, the British Foreign and Commonwealth Office seems to take the view that our governmental leaders have not been following any of the Constitution, the law, or the conventions of government in relation to borrowing. Their view appears to be that the new administration has ignored the rules, and gone off on a frolic of its own. The result has been an unfortunate division that has in recent days arisen between Government House and the local administration.
The British Minister for the Overseas Territories has been in Anguilla.  He has asked for an explanation of the Chief Minister's signing a letter, apparently not authorised by the Executive Council or by the House of Assembly. This 9 July letter authorised our Social Security Board to negotiate a US$200 million loan. The government of Anguilla by law guarantees all Social Security borrowing. Such a guarantee of a loan requires conformity with the Borrowing Guidelines agreed years ago between Anguilla and the Foreign and Commonwealth Office. Anguilla has exceeded its borrowing limits and is presently in breach of the Guidelines. The Minister is supposedly quite miffed at our irresponsible actions.  It is this incident that appears to have caused the UK Minister to question the actions of our government, and that has caused the resulting reaction by our leaders.
Whenever a country's leadership acts outside the law, when it has been shown to be self-destructing, when it becomes desperate to stir up a misguided following in its support, then the cry arises, “Let us join together against the foreigner in our midst. They are all traitors and will betray the nation! Out with the British!” A call for nationalism against “the other” is then seen as a unfiying force. The madness of it is that such ploys, obvious as they are, are so often successful. Then, confusion and chaos prevails over reason and common sense.  Every sensible Anguillian hopes that is not what is happening here.
The call to patriotism, to standing united against the brutal British, has all the ring of the revolutionary catch-phrase, “Liberté, egalité, fraternité!” And of Hitler's insane tirades against the Jews. Few thinking persons in Anguilla really believe that we are fighting against some reactionary evil foreign regime. Anguillians will forget Dr Johnson's warning, “Patriotism is the last refuge of a scoundrel” at our peril. Have no fear. Most of us realise that the call for independence is no more than false patriotism, a smoke-screen designed to hide defects in governance.
So, let me answer boldly, and with no concern for the inevitable labelling of being a neo-colonial lackey, and a running-dog of the imperial British. No, Anguilla is not ready for political independence. Yes, the people of Anguilla are independent-minded and normally we can run our own affairs. No, this is not a normal time. No, the call for independence being made now is not being made to advance our interests. Yes, it is more likely being made to hide the incompetence and wrong-doing of our politicians. And, I mean the politicians of all parties, past and present.
Anguilla will be ready for full internal self-government, and subsequently for independence, only after we have put in place the essential building blocks of democracy. We will be ready to hand our fates over to our local politicians, of whatever stripe or colour, when the British at last permit us to place in the Constitution the checks and balances and the watchdog institutions that will permit the people to hold those political leaders to account when they go astray. It isn't enough that the Constitution be amended in some hurried “reform”, and some legislation be cobbled up and passed without real discussion. These institutions must be working and functional. In my view, they must be proven to work for at least one full generation before we go independent if we are to be sure of our civil rights.
Until that has happened, we would prefer not to bare our necks to the sword of vindictiveness held above our heads by small-minded politicians who derive pleasure from lording it over us the ordinary people, knowing that we have little or no redress under our present system of government.
If we want to learn what victimisation really is, let us go independent like Antigua and Barbuda or St Kitts and Nevis did without a Constitution designed to protect the citizen against political and administrative abuse.
Until that time, when we have the institutions of democracy in place in our Constitution and in our law, we surrender what little protection being a British Overseas Territory affords us at our peril.
No, we are not receiving any grant in aid from the British government and taxpayer, and, yes, we raise all our own revenue ourselves. Yes, the piper calls the tune. But, no, we do not have to join the chorus when the song is out of key.
No, we are not yet at that much-to-be-desired point of being ready for political independence from the United Kingdom.

Related posts:

 
 



06 October, 2010

Due diligence

The Social Security Board is responsible for the safe-keeping of the Social Security Fund.  That is one of the reasons why the recent story about the Government of Anguilla consenting to the Social Security Board taking a particular loan is so disturbing.
Below is a letter from the Government of Anguilla to the Social Security Board.  It is in the public domain.  I found it posted on the website axareality.com.  It cries out for comment and for explanation.  It is dated 9 July 2010.  It was signed by the Hon Hubert Hughes, Chief Minister and Minister of Finance.  The Minister of Finance of Anguilla is the Minister for the Social Security Board.  The Board and its Investment Committee make their own investments, but the Minister has statutory power to oversee the Board’s activities.



The letter authorises Social Security to borrow up to US$200 million from United Investment Limited of Austin, Texas.  The letter authorises the use of the Social Security Fund to be the security for the loan.  I need not remind you that that Fund is the contributors’ money.  It is not the money of the government of Anguilla or of the members of the Social Security Board.  The Board has strictly limited powers to invest the Fund.  They are charged with what I consider a sacred duty to invest the monies in the Fund for the advantage of the owners, the contributors to the Fund.  Before they begin negotiating with a supposed lender about putting the Fund up as security, we would expect that they would do their due diligence to ensure they are dealing with a reputable institution.
For such a supposedly major financier, United Investment Limited's website is remarkable for the many grammatical and punctuation errors on its various pages.  Whoever the owners are, and despite the numbers they quote, they seem not to be big enough to employ someone to proof-read their website content.  You might almost think that their promotional materials on the website were written by a semi-literate schoolchild, rather than by the marketing department of a major financier.  It is also remarkably lacking in any solid information about the company or its work.
If you do a little detective work and investigate United Investment Limited further, this is what you find:
 
> domain:                          ui-ltd.com
> created:                         06-Apr-2006
> last-changed:                    07-Apr-2010
> registration-expiration:         06-Apr-2011
> 
> nserver:                         ns47.1and1.com 74.208.2.7
> nserver:                         ns48.1and1.com 74.208.3.6
> 
> status:                          CLIENT-TRANSFER-PROHIBITED
> 
> registrant-firstname:            Kirby
> registrant-lastname:             Gonzales
> registrant-street1:              660 Preston Forest center
> registrant-pcode:                75002
> registrant-state:                TX
> registrant-city:                 Dallas
> registrant-ccode:                US
> registrant-phone:                +214.6329531
> registrant-email:                info@dallasfestival.com
 
This tells us that the United Investment Limited website was created by one Kirby Gonzales in 2006.  In 2006, Kirby advertised the company as "an OEM manufacturer and Distributor of building electrical supplies and tools for constuction of housing, commercial, medical and educational institutes. We also sell Petroleum and Gas profucts." Yet, in the space of four short years, the company now claims the ability to lend or to arrange a loan of upwards of US$200 million.  That is quite an extraordinary accomplishment.
If you go to the corporationwiki.com website, you will find a list of other companies formed by Kirby and Stacy Gonzales.  From the addresses of their various companies, it seems that they operate out of Trinidad and Tobago.  It would appear to me that Kirby and Stacy are in the business, among others, of creating shell companies in Texas.  A shell company is one that is barely worth the paper its certificate is printed on.
Of course, the matter may just have been an advance-fee fraud.  This is a lucrative but dishonest business.  It involves a person calling himself an investment adviser pretending to desperate borrowers that he can find easy, cheap money for them to borrow.  All the borrower has to do is to pay in advance a fee of a few thousand dollars to be introduced to the lender.  It is usually demanded towards the end of the transaction when the desperate borrower feels the deal is about to close.  Once the fee is paid you never hear from the investment adviser again, and the lender mysteriously disappears.  In which case, we may have risked losing only a few thousand US dollars.  I am not suggesting that is what happened here.  Indeed, there is no evidence that any advance fee was asked for or paid. 
For the loan to have been authorised by government it would need to have been approved by the Executive Council.  Heaven alone knows how ExCo could have authorised the Chief Minister to sign such a thing as that letter.  The whole transaction should have been suspicious from the start.  It appears to have been a proposition that almost suckered in our Chief Minister.  Fortunately, the transaction seems to have been stopped by someone who did his due diligence.  In my opinion, the due diligence should have been done before the Chief Minister was asked to sign the letter. 
This is all very disturbing.  If you were unkind and wanted to be sarcastic you might say that this incident clearly indicates that Anguilla needs to declare immediate independence so that our leaders can work for the people without the interference of the “meddling British”.
Related posts:


23 September, 2010

British Minister's Visit

Henry Bellingham visits. The word I am hearing is that the British Minister stopped off in Turks and Caicos Islands and Anguilla for specific reasons.
        We know why he visited TCI. It has been published. The elections set for July 2011 will be delayed to allow time for anti-corruption and good-government reforms to take effect in the islands. You can read about it by clicking here: http://tcijournal.com/index.php?idsub=3249&id=8
        No reason for his visit to Anguilla has yet been suggested by any British or Anguillian official. However, I am informed that one of the first meetings that Mr Bellingham had was with the Social Security Board and the Executive Council.
        We know that since the election in February of this year the Government of Anguilla has borrowed some $60 million from the Board to pay civil service salaries. We know that was contrary to the “borrowing guidelines” that are by agreement binding on the Anguilla Government.
        We can expect that the FCO is not happy at this breach of the Guidelines.
        Could this be the reason for Mr Bellingham's visit to Anguilla?



19 July, 2010

No authorisation


Well, I have received a reply to my Freedom of Information Act request.  It reveals that there is no letter of authorisation for the Government of Anguilla to borrow funds from the Social Security Board.  All the borrowing from the Social Security Fund has been unauthorised.  Unauthorised borrowings to this date amount to some EC$43 million.  At this rate the Fund will be depleted, I estimate, in two years time.
This is the correspondence I have received:

This is the attachment referred to:

I have to tell you that I am grateful for what I consider to be a prompt and complete response to my request.  
I would like to hear what you make of it all.

Related posts:

12 March, 2010

Crisis


Government is to be commended on sharing this information with us. Our previous experience of government's handling of our money was that they would tell us, “It is none of your business”. Hopefully, they will keep it up.
It paints a stark picture.
“STATEMENT ON FISCAL POSITION
March 12, 2010
As a follow up to the presentation made by the Ministers of Government on the 11 March, 2010 please find following a release of the Fiscal Position as at December 31, 2009 and current.
Recurrent Revenue
At December 31, 2009 recurrent revenue collections totaled EC$145.65 million.  This represents a 30% decline from 2008 recurrent revenue collections of EC$203.74 million.  To put the situation truly into context, 2009 recurrent revenue collections were not only lower than 2008 but lower than 2007 and 2006 collections as well.  Consequently it is no exaggeration to say that recurrent revenue situation in Anguilla has been set back 5 years.  Key revenue heads such as Customs Duty Other, Stamp Duty and Accommodations Tax were down by 33%, 54% and 25%, respectively from 2008 collections.  It should be noted that revenue collections of EC$246.92 million was budgeted for 2009.
Recurrent Expenditure
Recurrent Expenditure for the year ending December 31, 2009, on the other hand, was EC$204.17 million, marginally lower than recurrent expenditure of EC$206.87 million in 2008.  A retrenchment in public sector salaries and wages and a partial freeze on hiring were key to cutting expenditure from the budgeted amount of EC$241.81 million for 2009. 
It should be noted that there were some EC$14.25 million in unpaid invoices as at the end of December 31, 2009 which will be accounted for in 2010 as they are paid.  These include:

  1. Anguilla Social Security Board: EC$6.88 million (Benefit Contributions)

  2. Civil Service pension Board: EC$1.57 million (Pension Contributions)

  3. ANGLEC: EC$1.32 million
Recurrent Balance
The recurrent balance, which is the difference between recurrent revenue and recurrent expenditure, for 2009 was a deficit of approximately EC$58.52 million.  This translates to an average monthly recurrent deficit of just under EC$5 million.  This is clearly unsustainable.
Capital Expenditure
In terms of capital expenditure this was approximately EC$10.58 million, a fraction of the EC$98.12 million budgeted for 2009.  The Capital Budget bore the brunt of the austerity measures imposed by Government.
Overall Balance
Given the situation with respect to the recurrent and capital accounts Government’s overall balance for 2009 was a deficit of EC$69.10 million.  This deficit was partially financed by the drawing down of Government’s fiscal reserves in the amount of EC$39 million.  The remaining deficit was financed by borrowing from the local and regional banking system. 
As a result of the deficit on Government accounts Central Government Debt increased to approximately EC$172.1 million in 2009, up from EC$149.65 million at the end of 2008. The government has found itself in a position where it has been borrowing money each month since October 2009 to fund Civil Servants salaries and other obligations. This practice is unsustainable and cannot be continued indefinitely. This will even prove to be more difficult because of the financial crunch where Banks and other lending institutions are finding it difficult to lend to government because of liquidity issues and the borrowing guidelines that the British Government has agreed with the Government of Anguilla.
The current Fiscal Position as at March 11, 2010 is as follows:

  • Overdraft position: deficit of EC$13.7 million

  • Payables: Unpaid bills: EC$16.3million
The financial position will temporarily improve with a grant of approximately EC$16 million expected from European Development Fund (EDF 9 4th Tranche). These funds will be used to repay a short-term loan of $12m from Eastern Caribbean Central Bank which is due and payable by April 1, 2010.
The Caribbean Technical Assistance Centre (CARTAC) has been providing ongoing support to the Government of Anguilla in a number of consultative and training initiatives. As part of this support the government is benefiting significantly from the expertise of Economic Consultant Dr. Eliahu S. Kreis who has been in Anguilla from 28 February, and leaves on 18 March 2010. He has been working with technical staff in the Ministry of Finance assisting with GDP and Fiscal projections for the period 2010 to 2014.
As a result based on the data compiled it is projected that revenue for 2010 will be approximately $148M while expenditure is expected to be around $237M. This will result in a recurrent deficit of over $89m. Therefore, the Government of Anguilla will have to limit its Capital Expenditure significantly which is normally funded by a recurrent surplus.
With this revelation the Government of Anguilla will have to find ways and means to narrow the gap between expenditure and revenue as the Ministry of Finance puts together the budget for 2010. The Government of Anguilla has been operating on a Provisional Budget in the absence of an Approved Budget for 2010. This arrangement cannot continue beyond 31 April 2010. However, the Ministry is confident that a budget will be finalized before the deadline. The gloomy position that government has find itself in means that serious measures will have to be implemented in order to stabilize the deteriorating financial position of the government.
Both Permanent Secretaries in the Ministry of Finance have been mandated along with other technical staff to put together a recovery plan that will assist the Government of Anguilla in closing the Gap identified. This will be completed in a short period of time in order to be reflected in the 2010 budget. When the recovery plan is completed the General Public will have an opportunity to review it.
One of the main revenue generators Customs Duty has experienced a leakage of over $ 113 million for the period 2005 – 2009. Government has therefore committed to the implementation of a new policy to address this practice.
Every effort will be made to cut out all wastage. In addition, the following areas have been identified and are being considered for review.

  • Rental agreements for office accommodation

  • Allowances

  • Freeze on hiring of new Staff

  • Redeployment of staff as oppose to hiring of new staff

  • Reduction in Electricity usage

  • Limiting the use of Governments vehicles after working hours

  • Training

  • Duty free concessions

  • Overseas travel not funded

  • Restructuring of Boards and Committees

  • Contributions

  • Roadside cleaning

  • Temporary staff

  • Contracts

  • Restructuring Debt
At this time an immediate cost saving initiative has been implemented with the retrenchment of Special Assistants, Advisers and Consultants that will result in savings of over $2m dollars. However, in the future consideration will only be given if absolutely necessary to persons with the technical expertise to contribute to the development of Anguilla in a meaningful way.
The new administration has committed to a consultative and an open approach in a spirit of cooperation with ministries and the general public. As a result the Ministry of Finance, welcomes any suggestions and ideas that the General Public can contribute that can positively impact the development of Anguilla.”
Borrowing $89 million to bridge the gap is clearly out of the question. No one would be so stupid to lend us that kind of money. Raising $89 million in additional revenue is impossible. We can't grow our economy before the end of the year, with the best intentions in the world. With the inevitable litigation that will follow, it could be two years before any compulsory acquisition of Flag could result in new funds flowing. Saving a few dollars by cutting Boards and rent is essential, but is not going to carry us far.
It seems to me to be inevitable. There will have to be major cuts in the establishment, and all public servants will have to accept major salary reductions.


21 February, 2010

Receivers


Can the Receiver at Flag Luxury Resort find a new buyer?  The answer is yes, he can find a new buyer.  But, there is not a damn thing he can do with the buyer, except tell him to go and talk to Robert FX Sillerman, the owner of Flag Luxury Resort. 
I do not know if you heard JB Turbidy being interviewed by Iwande on Upbeat Radio on the morning news about ten days ago.  What Turbidy said concerned me.  He repeatedly assured Iwande that the Salamander Group of investors was looking forward to the appointment of the Receiver at Flag Luxury Resort by Credit Suisse because that would enable the project to be sold to a new investor such as the Salamander Group.  He seemed convinced that the Receiver had the power to sell Flag to his group. That is so wrong, that I wondered if he had any advice before he spoke.   
Turbidy is not the only one mistaken.  The various newspapers carrying articles on the topic continue to repeat that Credit Suisse has “assumed ownership” of Flag.  Nothing could be further from the truth.
Anguilla has had since 1974 a pure system of registered land titles.  It is called the Torrens system after its Australian inventor Robert Torrens.  This system exists in several parts of Canada, the Commonwealth, and the United States, as well as in Anguilla.  It is a system whereby all deeds, and all common law concepts of land titles and interests in land, are abolished and replaced by a Register kept by government.  This Register is the only evidence of title to land in Anguilla. 
One of the reforms of the Registered Land Act of Anguilla was the abolition of mortgages, and the traditional rights of a mortgagee.  A lender secures a loan by registering “a charge” over real property.  When a secured loan goes into default, the creditor has only two remedies under our Act. They are, briefly, either (1) to appoint a Receiver of the charged property; or (2) to exercise the power of sale by public auction.  If a loan is in default, the secured creditor must give a 3-months notice either (1) to appoint a Receiver, or (2) that the property will be sold.  He cannot do both in the same notice.  Let us look at these two remedies.
First, what does it mean to appoint a Receiver of land in Anguilla?  The rights and powers of the Receiver are set out in the Act.  These rights and powers may not be expanded by contract beyond those given in the Act.  A lender cannot make a borrower sign a debenture increasing the rights and powers of the lender beyond those given by the Act.  To permit otherwise would be to corrupt and distort the remedies given in the Act.  Every lender would inevitably oblige every borrower to vary the limited rights of the lender to give the lender the widest possible rights.  The law does not permit that. 
If a loan goes into default, the Chargee may give the defaulting borrower a notice to the effect that unless the loan is brought current within 90 days the Chargee intends to appoint a Receiver.  The law enables the Receiver only to go into possession of the property and to manage it.  The Receiver runs it for the benefit, essentially, of the creditor until the loan has been paid off.  On the satisfaction of the debt, the Receiver is obliged to hand the property back to the owner.  His rights and powers are limited to managing the property in order to ensure the income goes to satisfying the debt.  Under no circumstances can he sell it to another investor, regardless of what the loan documents say.  He can sell nothing except in the ordinary course of business, eg, the sale of food in a restaurant.
A secured creditor has one alternative remedy under the Act.  That is the right of sale by public auction.  He no longer has the traditional remedies of a mortgagee under the common law.  The holder of a mortgage under the old law used to have the “right of forclosure”.  Forclosure gave the mortgagee title to the property, subject only to the right of the borrower to pay off the loan and get title back.  The holder of a mortgage used to have the right to go into possession of the property and to sell it to satisfy the debt.  He could sell by any means, once he tried his best to get the full market value.  That power of sale included the right to sell by private treaty.  That remedy has been abolished. 
The rights and powers of the lender who holds a mortgage charge are set out in the Act.  These rights and powers may not be varied except to the limited extent permitted by the Act.  The right of sale is, essentially, to appoint an auctioneer to sell the property by public auction.  No private sale is permitted.  The remedy of sale is given only to the holder of a charge exercising the right of sale as a chargee.  That right does not extend to a Receiver, who has no power of sale.  A sale by Chargee has the advantage that it wipes from the title all remaining charges and liens.  The purchaser from a Chargee obtains a free and clear title to the property.
In the event that a Chargee gives a notice to appoint a Receiver, the Chargee must appoint the Receiver with the limited powers of a Receiver, ie, to manage for the benefit of the lender.  A Chargee may not appoint a Receiver and simultaneously exercise the right of sale by public auction.  If the lender/chargee wishes to change his mind and sell, he must give the defaulting borrower a second notice to that effect, with another 3-month grace period.  The creditor has to give 3 months in either case.  So that, if there is no revenue to make the appointment of the Receiver worthwhile, and the creditor decides to exercise the right of sale, he must give another 3-months grace period to that effect.  
Given that Flag Luxury has no significant income that I am aware of, I cannot imagine why Credit Suisse would have wanted to appoint a Receiver.  There would be no income for the Receiver to deal with in satisfying the debt owed to the lender.
In the unlikely event that the Receiver did find a buyer, and persuaded the defaulting debtor to sell to this buyer, such a sale would be a disaster.  It would essentially be a sale by owner.  Such a sale would leave the property bound by all the existing obligations registered against title.  A sale by the chargee/lender is much more advantageous.  Sale by the Chargee would wipe the existing obligations from the title.  A purchaser would obtain a clean title from the Chargee.  That advantage is lost if the Chargee permits or pressures the borrower to sell to a new purchaser.  The new purchaser would take title encumbered with all the other debts and charges.  No properly advised potential investor in these circumstances would buy from the Receiver or owner.  He would insist on buying only from an auctioneer, or from the government after compulsory acquisition.
          Is there something in all this that is a matter of public record and that I am missing?
         Just remember that Don Mitchell is a dead-out, retired, ex-lawyer, and nobody can safely rely on anything he says about the law.



04 February, 2010

Borrowing still


Did Anguilla really need to make this borrowing?  There is an interesting question and answer exchange in the House of Lords concerning Anguilla in this morning’s sitting.  Lord Jones of Cheltenham, a Liberal Democrat peer, had posed the following written question to the British Labour Government:
To ask Her Majesty's Government why the Government of Anguilla have not received their European Development Fund tranche 3 payment, due by 31 December 2009; and what steps they are taking to ensure it is paid.
Baroness Kinnock of Holyhead, a Labour peer, responded:
The European Commission has authorised the disbursement of funds for Anguilla's third tranche of budget support under European Development Fund (EDF) 9 for €2.31 million. Anguilla should receive the funds shortly. There is no set timetable for the disbursement of EDF. Overseas Territories can request disbursement of each tranche of funding once they have implemented the conditions set out in the financing agreement between the European Commission and the territory. Although Anguilla's original request was sent in April 2009, the Commission did not receive all the associated paperwork from Anguilla until early January 2010.

The Minister for the Overseas Territories wrote to the Commission in July 2009 noting the delays in the disbursement of funds under EDF and urging the Commission to expedite their assessment of funding requests. Officials remain in regular touch with the Commission about the disbursement of funds.
Personally, I find this response very revealing.  It would appear that we had applied for this third tranche of €2.31 million in April 2009.  That is nearly a year ago.  It then appears that we failed to complete the associated paperwork until early January of this year! 
That extraordinary delay suggests to me that there is perhaps nothing urgent about this borrowing.  However, I did a search of The Anguillian to see if there was a recent reference to an EDF loan.  I came across an article in the issue of 14 September last.  It appears to explain what this loan is all about.  It reads in part:
Perin Bradley, Trade and Investment Officer, who spoke on the Government’s financial options on Friday, said the loan of 49 million dollars which was being sought, was intended to pay the Government’s overdraft of 20 million dollars, take care of some other debts, top up the reserve fund and pay outstanding loans owed to CCB and NBA to the tune of 7.4 million. He said a 20 million dollar loan from the Eastern Caribbean Financial Holdings would be used to finance the required safety end at the airport and the balance of 24 million, from the European Development Fund, would go towards the Government’s reserves.
The article does not explain which institution is granting us a loan of EC$49 million.  However, it is clear that the EDF loan is intended to go towards the Government’s reserves.  That is very vague, so vague as to be meaningless to a mere layman like me.
There is an interesting little side play here.  A British Liberal Democrat peer living in England is not likely to have such familiarity with Anguilla’s financial affairs to be able to ask such a question on his own initiative.  I surmise that some Anguillian politician who has become acquainted with Lord Jones prevailed on him to ask the question in an attempt to embarrass the Europeans into hurrying up the funding.  The reply of the Labour Peeress ensured, ever so politely, that the embarrassment fell squarely where it belonged: on the Anguilla Ministry of Finance which had apparently failed to send off the required paperwork to comply with the EDF requirements for disbursement.
Are you, look a wuk!

12 December, 2009

Releases


 The battle of the press releases?  The controversy highlighted in my post of yesterday continues in the press and on the airwaves.  The Minister of Finance of Anguilla was on Radio Anguilla at 9:00 pm and again at 10:00 pm last night attempting to explain away his embarrassment.  What appears to be indisputable is that the Eastern Caribbean Central Bank has lent the Government of Anguilla the princely sum of EC$12 million.  That should be just sufficient to restore the recent cuts made to public servants salaries, and to pay a double salary in time for Christmas.  The doubt lies in the circumstances in which the loan was made. 
According to the GoA press release, the government of Anguilla has never approached the government of Dominica for a loan or gift at any time.  That blanket denial would include a refutation that the GoA ever asked the GoD to extend some of its credit with the ECCB to Anguilla.  Our position is that the PM of Dominica has made an unfortunate claim.  Chief Minister Osbourne Fleming has contacted the Governor of the Central Bank, Sir Dwight Venner, and requested that he ask PM Skerrit to retract his statement.  Here is the Anguilla press release in full



Dominica has issued a press release attempting to clear up any misunderstanding over what PM Skerrit said.  It has explained that Dominica has not borrowed any funds from the ECCB for the past 5 years.  Dominica therefore has a credit with the ECCB to the tune of EC$89 million.  Anguilla, by contrast, had utilized all of its credit with the ECCB and could not borrow any more.  Dominica, therefore, last week gave Anguilla $12 million worth of Dominica’s credit.  The Dominica Minister of Finance, presumable at the request of the Anguilla Minister of Finance, had to give his consent in writing to this transaction.  So, the PM was not incorrect in stating that Dominica had helped its sister island of Anguilla.  He was merely speaking off the cuff, and may have used the wrong technical jargon.
Here is part of the Dominica press release:


Now, it will be obvious to a child that these two press releases cannot both be correct.  Either Anguilla went cap in hand to Dominica to extend some of its credit to Anguilla, or that is a complete falsehood. 
It will be interesting to see who has to apologise to whom.



11 December, 2009

Dominica


Just last week Dominica gave $12 million to Anguilla?  It is general elections time in the Commonwealth of Dominica.  So, you cannot believe everything you read in the Dominica newspapers at this time.  What I read with a degree of astonishment and disbelief in the Dominica News Online was that Dominica, one of the poorest countries of the Commonwealth Caribbean, has just “given” Anguilla $12 million out of its hard-earned savings and out of the goodness of Prime Minister Roosevelt’s Skerrit’s heart.  Dominica in 2006 is reported to have had a GDP per capita of $4,758, while Anguilla’s was $8,310.00.  You would not easily have concluded that Anguilla could be helped financially by Dominica.
These reverse alms from the poor man to the rich man would be an outrage against common decency, if the story were true.  The people of Dominica need schools, hospitals, roads, and libraries.  Would the outgoing Dominica government, struggling to be re-elected, take its hard-earned savings and loan them to Anguilla, with a significantly higher per capita GDP?  The Chief Minister not long ago was boasting that he was the highest paid head of government in the OECS.  Why would poor little Dominica do such a thing for Anguilla?  Would their government, going into a general election, draw down funds from the ECCB, that it could well use for the development of Dominica, to bail out the government of Anguilla?  I cannot readily believe the story to be true.
PM Skerrit jokingly says that he “gave” the $12 million to Anguilla.  He must be very confident of his support by the electorate in Dominica to have made such an irresponsible assertion.  We have to assume that he is conspiring with the government of Anguilla to hide from the Central Bank the fact that he is merely loaning, not giving, the money to Anguilla, a country that has exceeded its borrowing powers, and is unable itself to make this borrowing.  It is amazing that he can be so confident that the people of Dominica will really be happy about such a state of affairs.
Yet, you can listen to an audio recording of PM Skerrit making just that claim right here:

As usual, it was a pleasure to tune in to Haydn Hughes’ call-in radio programme On the Spot last night, which dealt with this news.  Independent candidate Sutcliff Hodge was one of his guests.  Their discussion was pretty thorough, but I thought they missed raising a couple of important points.
If this was a loan, was it authorized by a Resolution of the Anguilla House of Assembly, as provided for in the Financial Administration and Audit Act?  Why is this Resolution important?  Because this is the mechanism designed by law to ensure transparency in public borrowing.  This is how the people consent to government borrowing money that we, the people, will have to repay one day.  The government of Anguilla is prohibited by law from borrowing any money that has not been authorized by the House of Assembly.  This is what section 38 says:
Authorisation of debt
38. No money shall be raised on the credit of the Government except under the authority of this or another Act of the Legislature or of a resolution of the House of Assembly.
If this loan was not authorized by law or by a Resolution, is it not an illegal loan?  If it is illegal, who committed the offence?  Will there be any repercussions?  Will the auditor take it up for comment within the next five or six years, as is par for the course up to now.  And, if and when he does, will it not then be too late to make anything of it, as is usual, since by the time the audit report is published another administration will be in office?
I always had my suspicions that the famous British contingent liability was a figment of some bureaucrat’s fevered imagination.  Is this scorning by Anguilla of the long breached guidelines, put in place precisely to safeguard Britain’s contingent liability, further evidence of the spurious nature of this alleged liability?  Or, is it just evidence of hubris on the part of our Minister of Finance?  Does he believe that he has become all-powerful, and can do as he wishes with the public purse?
For what purpose would the money be borrowed?  The standard answer is to meet government’s commitments, of course!  Elections in Anguilla are around the corner.  Could the thinking be that a Christmas bonus must be paid, despite the economic downturn, if the public servants are to be kept mollified in order to ensure their support when the day for voting comes?  Never mind the piling up of public debt upon debt, that will be for someone else to sort out, after the general elections.
If true, the further fear must be that this unauthorized borrowing may just be the tip of the iceberg.  Are there other secret borrowings and commitments that our out-going government has obligated our new administration to settle in the new year?
May I wish everyone a Super Solstice!